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Joint venture to develop Sechaba coal project

Botswana Stock Exchange-listed Shumba Energy reports an agreement has been reached for the establishment of a 50:50 joint venture partnership between Shumba and black-owned Lurco Group South Africa at Shumba’s Sechaba thermal coal project situated in the Morupule coalfield in Botswana. The deal will allow the partnership to supply coal into the region and for export.

Lurco has been trading for eight years and is an emerging South African resource business with a focus on exploration, beneficiation and trading. It is a supplier to Eskom in South Africa and currently exports thermal coal to a number of international clients out of various ports in Southern Africa.

Under the commercial terms of the partnership, Shumba will transfer Sechaba and related authorisations to a special purpose vehicle (SPV). Lurco will immediately commence work to conclude any feasibility work and begin work on the opencast construction spending a minimum of US$10 million. Further, an amount of US$10 million will be paid to Shumba in phases prior to Lurco earning its 50 %. Lastly, development capital expended by both Shumba and Lurco prior to commercial production will be recouped from the SPV in the form of shareholder loans.

In addition to the above, the parties have agreed that coal produced at Sechaba from the open pit will be toll processed through a wash plant owned by Shumba.

The Managing Director of Shumba, Mashale Phumaphi, commented: “As a Botswana based and owned company, we are pleased to have concluded a partnership with such a progressive black South African company as Lurco. The transaction will grant us access to markets that we haven’t had access to before. Together with Lurco we will work towards regional inclusivity and the partnership is a clear example of fulfilling SADC’s objectives of integration between Southern African countries in the energy industry.

“The partnership is in line with Shumba Energy’s long-term strategy which is to address the chronic power shortage and satisfy the growing energy demand in the SADC region while monetising all of our existing assets. The terms we have received will ensure that we continue to accelerate the development of Sechaba while allowing us to fast track our other projects.”